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Insurance companies in Taiwan pay the price for misjudging Covid risks


TAIPEI — Insurance companies in Taiwan thought they hit the jackpot last year when they sold millions of Covid-19 policies that promised to pay people who contracted the virus.

Now, as Omicron variant As the coronavirus sweeps through the autonomous island, insurers are facing a flurry of claims, mounting losses and a wave of public anger.

Before this year, the number of daily Covid cases in Taiwan, a country with a population of about 23 million, was very low compared to the rest of the world, thanks to the island’s tight border controls as well as measures to prevent the spread of the virus. Strict quarantine and contact tracing. Taiwan went more than 200 days in 2020 do not have any local Covid cases and have largely extinguished an outbreak by 2021.

Covid-19 patients and their close contacts once had to spend weeks in isolation or government-imposed quarantine, often losing work and living with other disruptions. Taiwanese insurers have responded by launching a series of policies that promise one-time payments from about $340 to $3,400 to insured individuals who test positive for the virus. withdraw or those who have to be quarantined.

It’s an attractive proposition for many, who pay an average of about $30 for a one-time premium for a year of coverage. About a dozen Taiwanese property and casualty insurers have sold more than 12 million Covid-19 policies in the past two years and collected the equivalent of $355 million in coverage, according to regulators. . About 7.6 million of those policies were in effect as of May.

After containing the virus, Taiwan in recent months change from policy 0 Covideasing restrictions as cases increase rapidly.

The number of daily new infections peaked at 94,855 at the end of May and averaged around 50,000 cases per day over the past two months, resulting in a high number of claims from insured individuals. So far, nearly 14% of Taiwan’s population has contracted the virus.

The rise of new infections in Taiwan has led to an increase in claims from Covid-19 policyholders, who either tested positive or had to be quarantined; a driving test site in Taipei.


Image:

Lam Yik Fei / Bloomberg News

Taiwanese consumers have so far filed nearly 270,000 lawsuits, demanding compensation equivalent to $357 million. More statements are likely to come, and regulators and analysts alike expect industry losses to grow. Insurers have also stopped selling and renewing pandemic insurance policies, leaving customers who signed up or renewed their policies in tears.

Last month, at a legislative session on the issue, a lawmaker asked a top official at Taiwan’s Financial Supervisory Commission whether the total number of complaints from Covid-19 policies would up to 1.4 billion USD or not. The figure is based on an estimate that about 15% of policyholders have Covid.

Committee Chairman Huang Tien-mu said the final total could be even higher, adding that it was difficult to give an exact estimate of the damage while the situation was still evolving.

“Because of the fluidity of the pandemic, the insurance industry has paid a heavy price for these Covid products,” said Mr. Huang.

Taiwan Ratings, a subsidiary of S&P Global Ratings, recently estimated that the total number of claims from Covid’s policies could amount to the equivalent of $1.6 billion if 20% of policyholders are infected and The average claim per policy comes to about $1,340.

According to Patty Wang, a credit analyst at Taiwan Ratings, an increase in claims could wipe out full-year profits for insurers. The company expects the country’s general insurers to report overall underwriting losses in 2022, ending a 21-year streak of profits.

Christie Lee, senior director of analysis at rating firm AM Best, said the Taiwanese government’s policy of moving to live with Covid was not anticipated by insurers.

Taiwan’s health authorities have been criticized by insurers and consumers for changes to testing and shortening quarantine requirements that could affect people’s ability to collect money.

The rush to get hard copies of positive Covid tests to submit for insurance claims has resulted in long queues at hospitals, which has put further pressure on Taiwan’s already yellowed testing capacity. Loan. That was before insurance companies said they would accept digital certificates.

“Our pandemic policies have never taken insurance companies into account. We only think about how to take good care of patients,” Taiwan’s Health Minister, Chen Shih-chung, said during the recent Covid daily briefing.

Taiwan’s Covid coverage situation is the most recent example of a trend that has swept the region. In China, the seller “quarantine insurance” pull the plug on the product as millions of people across the country have been locked up amid the recent wave of Omicron infections. Japanese insurers offering Covid products have increased premiums or stopped sales, while in Thailand some insurers have shut down after being overwhelmed by claims often about Covid products.

“It’s more of a gamble than an insurance product,” said Po-Lin Wang, who previously worked for a Taiwanese insurance company and now teaches insurance and risk management at the University of South Florida. dangerous.

One of the biggest sellers of pandemic policy is Fubon Insurance, a unit of the group

Fubon Financial Holding Co.

In May, the company said it had sold more than 2.3 million Covid policies, generating nearly $157 million in premiums.

In one of Fubon’s advertisements, the company promised a fixed amount of “interest coverage” to people who were confirmed to have Covid.

“Regardless of occupation and gender; a fixed rate. There is no waiting period and no need to disclose health information,” reads the information.

Fubon Insurance has so far received more than 29,000 claims for a total of $37 million, about a third of the company’s first-quarter profit.

In a written response, Fubon Insurance said it is closely monitoring the Covid situation in Taiwan, overall risk appetite and cash flow to ensure capital adequacy. The company added it intends to have “tighter control” over its future products.

Mr. Huang, Taiwan’s financial regulator, said some insurers are under pressure to inject capital to cover their Covid debts.

Earlier this month, Cathay Century Insurance Co., another major Covid insurer with about 835,000 active pandemic policies, said it would receive an investment of about $336 million from its parent company. Cathay Century said it made the move first “to keep our promises to our policyholders and be prepared.”

Write letter for Joyu Wang at [email protected]

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